Instant Credit's Next Magic Trick

“Buy now, pay later” started as a credit card killer, but what if it’s really an end run around the Facebook ad-industrial complex?

- By Ainsley Harris

The fashion retailer Express, a mall-culture staple, is on a mission to transform itself for the digital era. It manages a flock of social-selling influencers and is using data to personalize the experience of browsing its hot-pink crop tops and sequined statement blazers. The finishing touch on this brand makeover? A partnership with buy now, pay later (BNPL) company Klarna to co-brand digital ads and offer Klarna’s “Pay in 4” product—which splits shopping-spree expenditures into four interest-free biweekly payments—at checkout. “We want to give customers with a certain perception of us an opportunity to change that perception,” says Brian Seewald, Express’s SVP of e-commerce. “We’re taking the risk out of a purchase with BNPL,” adding that Express customers who opt to use Klarna have a higher average order value.

Buy now, pay later services, which offer shoppers a financing solution and credit card alternative, have been embraced by more than 100 million people around the globe in less than a decade. Most BNPL companies operate two consumer products: an interest-free offering, which breaks up a purchase, typically a smaller-scale transaction, into three or four equal payments; and interest-based installment loans, which spread out the cost of larger purchases, like furniture. Market leaders Affirm, Afterpay (which Block, formerly Square, acquired for $29 billion), and Klarna are now ubiquitous on e-commerce sites. Meanwhile, leading digital wallets PayPal and Apple Pay are pursuing their own BNPL products. Affirm shares tanked 10% in July of last year when Bloomberg reported Apple's intention to launch a pay-later product with Goldman Sachs.